The iron ore price surged Tuesday on expectations a recovery in economic growth, including additional support from the Chinese government, will boost demand for steel.
According to Fastmarkets MB, benchmark 62% Fe fines imported into Northern China were changing hands for $146.13 a tonne, up 7.3% from Monday’s closing.
The most-traded Dalian iron ore contract for January 2022 delivery jumped 6.2% to 817.50 yuan a tonne, bouncing off a 7-1/2-month low hit on Friday.
Futures in Singapore rebounded as much as 10% as a potential boost to the US vaccination drive lifted sentiment across assets from stocks to base metals.
Separately, China’s central bank chief vowed to stabilize the supply of credit and boost the amount of money supporting smaller businesses and the real economy after both credit and economic growth slowed in July.
In China, “people are hoping for some further stimulus targeting the infrastructure sector, as real estate and manufacturing are looking bleak,” said Erik Hedborg, principal analyst at CRU Group.
“In the rest of the world, we are seeing steel production stabilizing at levels below pre-pandemic levels.”
Official data also shows that the Chinese economy is slowing more generally, particularly in property and infrastructure.
“The infrastructure and property sectors account for 20-25% and 25-30% of China’s steel demand respectively,” noted Commonwealth Bank commodities analyst Vivek Dhar.
Iron ore lost about a quarter of its value over the past month, as China’s push to reduce steel production hammered demand.
(With files from Reuters and Bloomberg)